HSBC 2011 Annual Report Download - page 233

231
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
to the Board on matters relating to financial
reporting.
The Board has determined that M K T Cheung,
J D Coombe, R A Fairhead and J R Lomax are
independent according to SEC criteria and may be
regarded as audit committee financial experts for the
purposes of section 407 of the Sarbanes-Oxley Act
and have recent and relevant financial experience for
the purposes of the UK Corporate Governance Code.
The governance structure for the oversight of
financial reporting is set out below. Similar
governance arrangements are in place in major
operating subsidiaries.
Governance
Authority Membership Responsibilities
Board Executive and non-
executive Directors
• Responsible for financial statements
• Appoints senior financial officers
• Delegates authorities in relation to financial matters
GAC Independent non-executive
Directors
• Monitors the integrity of financial statements
• Oversees the internal control systems over financial reporting, including reviewing their
effectiveness
• Monitors and reviews the effectiveness of the internal audit function
• Reviews the Company’s financial and accounting policies and practices
• Advises the Board on appointment of the external auditor and is responsible for oversight and
remuneration of the external auditor
Subsidiary board
committees
responsible for
oversight of
financial
reporting
Independent non-executive
directors and other
independent members
• Provide certification to the GAC or intermediate audit committee on financial statements and
internal controls over financial reporting of relevant subsidiaries
Committee’s activities
The GAC undertook the following activities in the
discharge of its responsibilities:
• Internal controls over financial reporting.
The Committee satisfied itself that the system of
internal control and compliance over financial
reporting was effective through regular reports
from the Group Finance Director, the Group
Chief Accounting Officer, and the Group Head
of Internal Audit. The Committee reviewed
minutes of the Group Risk Committee (‘GRC’)
and executive committee meetings including the
GMB, Risk Management Meetings and the
Disclosure Committee. The Committee
undertook an annual review of the effectiveness
of HSBC’s system of internal control over
financial reporting. HSBC’s internal control
system is described on page 240. The
Committee also reviewed the adequacy of
resources, qualifications and experience of staff
in the finance function. Reports were submitted
to the Committee on internal control matters in
relation to the Sarbanes-Oxley Act. The Group
Finance Director, the Group Chief Risk Officer,
the Group Head of Internal Audit, the Group
Chief Accounting Officer and other senior
executives attended Committee meetings. The
Committee had regular discussions with the
external auditor and the Group Head of Internal
Audit, with an opportunity at each meeting for
discussions to take place without management
present.
• Effectiveness of the internal audit function.
The Committee satisfied itself that the internal
audit function was effective and adequately
resourced through regular meetings held with,
and reports provided by, the Group Head of
Internal Audit on internal audit issues, including
the adequacy and effectiveness of resources.
The Committee reviewed an annual report on
the activities of the internal audit function and
planned activities for the following year.
• Legal and regulatory environment. The
Committee received regular updates on the
application of changes in law, regulation,
accounting policies and practices and regulatory
developments, including reports on Basel III,
the recommendations of the Independent
Commission on Banking, regulation of Global
Systematically Important Financial Institutions,
and the Dodd-Frank Act. Regular reports were
received on litigation. The Committee received